Is a second appraisal required for an FHA loan when a property is flipped?
This comes up for FHA deals when investors purchase properties and then “flip” them. I’ve seen quite a few flips in the Sacramento area over the past year (yes, even in this economy). I hope the information below proves helpful in case you are wondering when a second FHA appraisal is required during a flipping scenario. Verbatim from HUD:
FAQ : Is a 2nd appraisal only required under the Property Flipping Rule?
Solution Details : Under property flipping guidelines, a lender must obtain a second appraisal by another appraiser if:
1. the re-sale date of a property is between 91 and 180 days following the acquisition of the property by the seller, and
2. the resale price is 100 percent or more over the price paid by the seller when the property was acquired.
When a second appraisal is required
- It must be completed by a FHA Roster appraiser selected by the Direct Endorsement lender that is underwriting the loan.
- The cost of the second appraisal may not be charged to the borrower.
- The lender must not request a second case number in the FHA Connection for the purpose of obtaining the second appraisal and is to independently contact the appraiser.
- Only the information for one appraisal may be entered into the FHA Connection appraisal logging screens, which is the appraisal that is relied upon to determine the maximum loan amount.
- Copies of both the first and second appraisals must be included in the case binder submitted for insurance endorsement.
ML:09-48 Handbook 4155.2: 4.7, 4.7.f, 4.10.b-c
If you have questions or any appraisal needs, feel free to contact me at 916-595-3735 or ryan@LundquistCompany.com.
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